NEJM Catalyst
John Glaser, PhD, Stanley Shaw, MD, PhD
March 23, 2022
vdibrasil
Key messages
Summarized by Joaquim Cardoso MSc.
Chief editor of the “Health Revolution Institutes”
March 23, 2022
Introduction
- Digital transformation rests on the effective adoption of information technology to improve an organization’s performance and competitive position.
- Despite significant advances and even more significant potential, health care is not one of those dramatically transformed industries.
- Until recently, most health care providers haven’t felt enough urgency to solve these problems to offset the amount of expense and effort that effective solutions would entail.
- However, several factors are pushing providers toward a more organized and determined pursuit of digital transformation.
Success Factors
Digital technologies are only valuable to the extent that they can be effectively applied to achieve organizational goals. They are a means, not an end.
There is no recipe for guaranteed success. Nonetheless, based on our experience working for and with health care institutions and our research of organizational achievement, we have identified three common success factors across a range of industries:
- Organizations resisted being seduced by technology in and of itself, but instead focused first on what transformations they needed to achieve, and then on how technology could enable those transformations.
- Significant transformation was achieved via business model innovation.
- Organizations developed strong organizational transformation change management competency.
Conclusion
- All health care providers today face the imperative of adopting new digital tools and developing a thoughtful digital transformation strategy to implement and support such adoption.
- How successfully they manage this process will play an enormous role in how successful they are overall.
- While the health care industry often clings to its exceptionalism and believes that the lessons of other industries cannot be applied to its operations, we believe it can — and should — learn from the successes and failures of the industries that are further ahead on their digital journeys.
ORIGINAL PUBLICATION (full version)
Digital Transformation Success: What Can Health Care Providers Learn from Other Industries?
NEJM Catalyst
John Glaser, PhD, Stanley Shaw, MD, PhD
March 23, 2022
vdibrasil
Introduction
Digital transformation rests on the effective adoption of information technology to improve an organization’s performance and competitive position.
While rudimentary forms of digital transformation have been possible ever since the introduction of the first commercial computers, the possibilities have proliferated over the past 25 years with the opening of the Internet, the emergence of Wi-Fi, and the introduction of the smartphone, among many notable developments.
No industry has remained untouched, while many — publishing, travel, retailing, and finance in particular — have transformed utterly.
New developments such as the Internet of Things and the burgeoning of artificial intelligence promise to maintain and accelerate the pace for the foreseeable future.
Despite significant advances and even more significant potential, health care is not one of those dramatically transformed industries.
Rudimentary electronic health records (EHRs) emerged in the mid-1970s and achieved some commercial viability by the 1990s, but health care providers were reluctant to invest on a broad scale until the federal Meaningful Use program, initiated in 2009, offered them billions of dollars in incentive payments for installing EHRs and using them to improve operational and clinical processes according to the program’s benchmarks. While the resulting widespread adoption of EHRs has led to better availability of information and substantially less paper, EHR systems still lag in usability and the capacity to share information with one another. In addition, the implementation of “digital front door” capabilities — to give patients convenient access to both their medical information and their providers — is nowhere near as advanced as similar applications in industries such as banking, travel, or even food delivery.
Despite significant advances and even more significant potential, health care is not one of those dramatically transformed industries.
Until recently, most health care providers haven’t felt enough urgency to solve these problems to offset the amount of expense and effort that effective solutions would entail.
However, several factors are pushing providers toward a more organized and determined pursuit of digital transformation:
- Pressures from payers, patients, and regulators to improve care quality, safety, and access, and to reduce costs
- Patients’ growing comfort with telehealth and other digital technologies, whose adoption has accelerated out of necessity during the Covid-19 pandemic
- The advent of new technologies, e.g., artificial intelligence (AI), which provide the ability to tackle problems and take advantage of opportunities that have previously been out of reach
- A sharp increase in venture capital and private equity investments, which is spurring a wave of innovation in digital health, including telehealth, remote monitoring, and advanced analytics
- The aggressive introduction of digital health care products and services by the tech giants (Google, Microsoft, Apple, Oracle, and Amazon), and technologically savvy retailers, pharmacies, and care-delivery start-ups
However, several factors are pushing providers toward a more organized and determined pursuit of digital transformation:
Success Factors
Digital technologies are only valuable to the extent that they can be effectively applied to achieve organizational goals. They are a means, not an end.
There is no recipe for guaranteed success. Nonetheless, based on our experience working for and with health care institutions and our research of organizational achievement, we have identified three common success factors across a range of industries:
- Organizations resisted being seduced by technology in and of itself, but instead focused first on what transformations they needed to achieve, and then on how technology could enable those transformations.
- Significant transformation was achieved via business model innovation.
- Organizations developed strong organizational transformation change management competency.
We have identified three common success factors across a range of industries:
(A) Organizations … focused first on what transformations they needed to achieve, and then on how technology could enable those transformations;
(B) Significant transformation was achieved via business model innovation;
(C) Organizations developed strong organizational transformation change management competency.
A.Technologies versus Transformation
Successful companies don’t allow themselves to be distracted by technological “shiny objects.”
Digital technologies are only valuable to the extent that they can be effectively applied to achieve organizational goals. They are a means, not an end.
- Focus on the Strategic Objectives
- Understand Why a Particular Technology May Be an Important Tool
- Engage in Iterative Learning
1. Focus on the Strategic Objectives
How might a health system apply this principle in evaluating its digital options?
Suppose its strategic objective is to become both a provider and an insurer to leverage this dual role to advance care quality and efficiency.
Being both a provider and a payer changes a health system’s economic equation. Because it is billing itself for the care it provides, any technology has to help it deliver both better care and lower cost.
In addition, it must offer patients who are covered by its health plan such an excellent experience that they have no incentive to go outside the system to seek care that the health system, in its role as insurer, would have to pay for.
The health system can thus ask how any specific technology can advance one or more of these related goals of quality, efficiency, and excellent patient experience.
The health system can thus ask how any specific technology can advance one or more of these related goals of quality, efficiency, and excellent patient experience.
2. Understand Why a Particular Technology May Be an Important Tool
Netflix, as its name indicates, could not exist without the Internet, which enabled customers to skip the trip to the video store and select from a wider variety of DVDs, at the same time saving Netflix the cost of establishing physical stores.
Analytics supported Netflix’s ability to suggest movies based on prior rentals, further improving the customer experience.
A health system should be able to state in one or two sentences the core potential contribution of a technology, either to improve its capabilities or to enable capabilities that were previously impossible or impractical. For example:
- Applying AI to EHR data may enable us to identify differences quickly and efficiently in the effectiveness of various treatments.
- AI-based bots that recognize emotions and cultural expressions may enable us to provide a richer call-center experience to our patients who have questions about their health or recent bills.
A health system should be able to state in one or two sentences the core potential contribution of a technology, either to improve its capabilities or to enable capabilities that were previously impossible or impractical.
As the technology develops, its range of capabilities will expand.
This statement of capabilities helps leadership understand why the technology might be important as well as appreciate the full range of potential uses.
AI, for example, can be used today to recognize patterns in data, analyze radiology images, track medication purchasing patterns to detect disease outbreaks, and flag potential medication side effects.
As the technology develops, its range of capabilities will expand.
Netflix’s use of the Internet grew in scale and complexity as the technology developed. Successful organizations plan for the expanded use of truly potent technologies.
A health system should be able to state in one or two sentences the core potential contribution of a technology, either to improve its capabilities or to enable capabilities that were previously impossible or impractical.
3. Engage in Iterative Learning
The most powerful technologies usually take a while — and require several iterations — for the technology to mature and demonstrate value and for the adopting organizations to understand the change management steps needed to achieve that value.
Take a step or two and then assess. Then take another step or two and reassess.
The most powerful technologies usually take a while — and require several iterations — for the technology to mature and demonstrate value and for the adopting organizations to understand the change management steps needed to achieve that value.
Take a step or two and then assess. Then take another step or two and reassess.
Telehealth adoption is a good example of this process for a health system
As the technology evolved, Netflix learned how to capitalize on this evolution. It phased out DVD rentals as it increased its volume of video streaming. The explosion in consumer adoption of smartphones led Netflix to offer video viewing from a mobile device. The ability of the analytics to suggest movies to individual users became more sophisticated and pointed the company toward developing its own content.
In addition to iterative learning about the technology, Netflix also evolved the way that people paid for its services. Payment per DVD rental was replaced by an all-you-can-watch subscription model, which enhanced the convenience and stickiness of the service. The model has carried over into the streaming service and normalized Netflix bingeing as a favorite form of entertainment.
Telehealth adoption is a good example of this process for a health system. The introduction of telehealth at scale can proceed through several steps and iterations.
The technology can be trialed in a primary care clinic and then progressively expanded to other clinics and specialty practices as its basic reliability and usability is established.
Along the way, the providers learn about necessary operational changes (for example, managing virtual waiting rooms), and changing staff roles, such as determining who can best triage urgent care telehealth sessions.
Providers must also work iteratively with payers, to determine how telehealth is reimbursed, and with professional societies to determine which services can be offered effectively via telehealth and which ones need to remain in-person. (These determinations are likely to change as the technology develops; for example, the high resolution on the latest generation of cellphone cameras has expedited the feasibility of teledermatology.)
B.Transforming the Business Model
Successful digital transformation often catalyzes the creation of new business models.
Uber, for example, fundamentally changed the on-demand ride business using a technology foundation of networked mobile devices with global positioning system (GPS) capabilities.
The basic what — a trip from point A to point B — has probably been around almost as long as the wheel, and the selling of individual trips hadn’t had a major innovation since 1897 with the introduction of the taxi meter in the first taxicab.
The new how — the Uber mobile app — changed the business model of the industry. Riders in Uber’s service areas know exactly who’s going to pick them up, when, and how much it’s going to cost. But they probably can’t just hail a cab anymore.
Amazon has changed the business model of retail along multiple dimensions.
First, it offers a product selection that numbers in the millions made possible through millions of suppliers.
Second, it created a platform that supports third-party retailers selling their products and services.
Third, its overnight and even same-day shipping services have transformed the concept of “mail order”: they almost duplicate the instant gratification of buying something in a store, without having to go to the store.
They made core processes faster and simpler, with one-click ordering and later the ability for customers to ask digital assistant Alexa to put their order together. (The potential transformative power of the Alexa technology in general is a subject for another, more dystopian, day.)
Amazon has changed the business model of retail along multiple dimensions.
The organization introducing the change forces other participants to play by new rules that may disadvantage the laggards and advantage the pioneer.
Uber competitors, such as Lyft, must compete by offering at least the same capabilities and improving on them if possible.
Taxi companies must do the same.
Retailers attempting to compete with Amazon must offer some type of improvement on product selection, whether it’s better curation, higher quality, or uniqueness, and they can no longer afford to ignore the appeal of free, next-day shipping.
Successful digital transformation often catalyzes the creation of new business models.
Health care business models are beginning to shift anyway:
- from simply providing reactive medical care
- to focusing on prevention, chronic disease management, and (as much as possible)
- the delivery of health.
Health care business models are beginning to shift anyway: from simply providing reactive medical care to focusing on prevention, chronic disease management, and (as much as possible) the delivery of health.
How might digital technologies expedite this shift and otherwise transform health care business models? Here are just a few ways:
- Integrated EHRs, patient portals and apps, and remote monitoring allow providers to expand from a single venue of care, such as a hospital or physician practice, to providing care across the continuum, including inpatient, ambulatory, and home care.
- Population health analytics and the incorporation of outside data allow providers to address a patient’s social determinants of health — poverty, food insecurity, homelessness — in addition to their medical needs, promoting health more effectively.
- Sensor technologies can provide early warnings of changes in health status, allowing providers to play an important role in prevention and avert serious illness, and can enable hospital-at-home care.
How might digital technologies expedite this shift and otherwise transform health care business models? Here are just a few ways:
(1) Integrated EHRs, patient portals and apps, and remote monitoring ;
(2) Population health analytics and the incorporation of outside data allow providers to address a patient’s social determinants of health;
(3) Sensor technologies can provide early warnings of changes in health status.
A digital transformation discussion most often starts with goals and objectives and then examines technology options, but sometimes change begins with the evaluation of a new technology and the opportunities it might offer.
It quickly became clear that the Internet would enable a retailer to easily reach large numbers of people over a wide geography.
The first retailers to exploit this capability were small vendors of niche products who for the first time could reach and aggregate a viable customer base without depending on their traditional mail-order catalogs and word of mouth, but mass retailers soon followed.
AI has enabled sophisticated financial planning services to be offered at low cost to the masses, altering the financial industry.
A digital transformation discussion most often starts with goals and objectives and then examines technology options, but sometimes change begins with the evaluation of a new technology and the opportunities it might offer
Health care will have a bounty of opportunities for technology-driven transformation, particularly as AI applications find their way out of research labs and into the clinic.
Health care will have a bounty of opportunities for technology-driven transformation, particularly as AI applications find their way out of research labs and into the clinic.
Traps
As they examine new business models — and the digital technologies that will be needed to support those new models — all organizations, including health systems, have to be careful of two traps.
As they examine new business models — and the digital technologies that will be needed to support those new models — all organizations… have to be careful of two traps: (1) First, the vision and strategy may be flawed, and (2) Second, companies often leverage a technology to engage in continuous product and service improvement
First, the vision and strategy may be flawed.
For any number of reasons, an organization may misread the economic environment, competitive situation, regulatory moves, shifting customer desires, or its ability to execute the transformation.
It may have executed a flawless transformation, but the result was not valued by its customers. No technology can save a flawed strategy.
Second, companies often leverage a technology to engage in continuous product and service improvement.
Continuous improvement is always a good idea, but it is not the same as an effective change in a business model.
Companies can fail to transform when they set their sights too low and, as a result, remain vulnerable to competitors who have developed business models that change the basis of industry competition.
C.Change Management
Moreover, the transformation plan evolves with time.
While the overarching objective of an organization may be constant, the journey of the transforming organization will take advantage of new technologies, react to the success or failure of its efforts to date, adjust to changes in business conditions, and respond to the moves of competitors. Because the world does not stand still, the transformation journey never ends.
No technology can save a flawed strategy.
No technology can save a flawed strategy.
While the ultimate transformation may be radical, the steps to achieve it usually need to be incremental, especially in large, complex organizations.
Sudden dramatic changes can create chaos and obscure the long-term vision. Incremental progress enables the organization to continue meeting today’s demands while it moves toward its transformed future.
While the ultimate transformation may be radical, the steps to achieve it usually need to be incremental, especially in large, complex organizations.
Near bankruptcy in 2004, the LEGO Group launched a digital transformation that is still underway today.
The transformation involved creating tools that enable children to design their own LEGO toys, share their design with other kids, and play with toys that combine LEGO figures such as LEO Super Mario and obstacle courses with an app that guides play. During the first half of 2021, LEGO sales grew 36% and net profit rose 140%.
Disney began the digital transformation of its theme park business in 2000 using analytics to improve the customer experience.
That journey has evolved to using AI to develop a mobile app that provides real-time analysis of customer movement within the park, ensures encounters with Disney characters, and suggests attractions that might be of interest.,
Of the top 10 most visited amusement parks (pre-Covid-19) in the world, eight were Disney properties.
A health system may have an overarching objective of delivering high-quality and efficient care. Its digital transformation journey may take it through a series of significant initiatives, including but not limited to:
- Implementation of an enterprise electronic health record
- Standardization of care processes
- Development of analytics to measure care costs and quality
- Implementation of population health programs
- Integration of care across multiple venues
- Creation of digital front-door capabilities
- Implementation of telehealth
- …
A health system may have an overarching objective of delivering high-quality and efficient care. Its digital transformation journey may take it through a series of significant initiatives …
Each of the initiatives takes time and often proceeds incrementally. Along the way, government actions, pandemics, and new entrants will change the transformation journey.
Disney, for example, has established StudioLAB to pursue, with industry partners, innovations in creative technologies, including location-aware virtual reality and drones to scout filming locations.,
Conclusion
All health care providers today face the imperative of adopting new digital tools and developing a thoughtful digital transformation strategy to implement and support such adoption.
How successfully they manage this process will play an enormous role in how successful they are overall.
While the health care industry often clings to its exceptionalism and believes that the lessons of other industries cannot be applied to its operations, we believe it can — and should — learn from the successes and failures of the industries that are further ahead on their digital journeys.
All health care providers today face the imperative of adopting new digital tools and developing a thoughtful digital transformation strategy to implement and support such adoption.
While the health care industry often clings to its exceptionalism and believes
… we believe healthcare can lern — and should — learn from the successes and failures of the industries that are further ahead on their digital journeys.
About the authors
John Glaser, PhD Executive in Residence, Harvard Medical School, Executive Education, Boston, Massachusetts, USA
Stanley Shaw, MD, PhD Associate Dean, Harvard Medical School, Executive Education, Boston, Massachusetts, USA
Table of contents (TOC)
- Introduction
- Success Factors
- Technologies versus Transformation
- Transforming the Business Model
- Change Management
- Conclusion
Originally published at https://catalyst.nejm.org on March 22, 2022.
